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So much, Mr. Number five, and influential economists in the whole wide world like ever, ever. How do you get there, Mike? How do you do you know what it's all about?
It's all about education, dissemination, economics, making it interesting, you know, because I've always thought education is the key. The more education you get, the more the world opens up to you demystify it.
So, I mean, on that note, there's some really interesting courses, this part time degrees, professional diplomas, postgraduate springboard programs at the Dublin Business School. And they're in law on fintech and psychology and marketing and business and loads and loads of topics. Yeah, what I like about these courses is they actually allow people to just keep their sort of work life balance and do online. You can do part time, have a look at them. They're really interested.
DBS, Dorahy, haven't gone to the website to have a look at these, you know, really fascinating courses.
Yeah, you're absolutely right, Mark. And while we're at it, we'd like to thank TB's for sponsoring this episode.
What in the world is happening on Wall Street? The economic indicators, those where this is going to end up to understand the economy, you have to understand human nature.
This podcast is powered by Akehurst. Hello, it's John here, it's the podcast, the Dave MacWilliams podcast, where, as you know, we try to make economics a little bit more accessible, a little bit more relevant and a little bit more simple free, just like me who didn't pay enough attention in economics class in school. Anyway, we've a bit of a different episode for you this week. This is a chance that Michael had with Mark Blyde and Eric Lonigan, the two authors of a fantastic new book called Angry Nomics.
In the book, they talk about the growing anger around the world as a catalyst for economic change. It's about big ideas, yet simple solutions. Stuff Up Myself and Macher have talked about on this podcast over the last year, things like wealth funds, digital tax, dual interest rates. It's really is fascinating stuff. But above all, these ideas and these solutions are very, very doable. Look, it's a fascinating conversation and it's a brilliant book.
So let me take it from here. And actually, just before we do that, I just want to take the opportunity to remind you that from next month, our economics courses will be CPD applicable. So you'll be able to get continual professional development points to her economics course as my tutorials and so on will give you all the details over the next few weeks. So for now, I'll just hand you over to Mucker. Now, in the last couple of weeks, I have been lucky enough to get a review copy of a book that is just published called Angry Nomics, and rarely do you read an economics book that makes you sit up and say, wow, these are interesting ideas.
And I've just read one. It's called Angry Nomics by Mark Blythe and Eric Loneragan. Mark's a Scotsman. Eric is the Dubliner. Mark has written a fantastic book. He's also a killer economics regular called Austerity The History of a Dangerous Idea. Fantastically interesting. Look at why austerity is needless. Eric came across my radar screen on a beautiful little book on money, the philosophy of money well worth both of those books having to look at. But now they've come together with a new book called Angry Nomics.
I have both of them on the line. Mark. Eric, how are you lads? I mean, yeah, furious Nevitt Grace, tell me, tell me, tell me exactly livid and angry. Tell me guys, maybe Mark the book had an unusual delivery, which was a conversation between both of you. Why did you decide? Before we get into the issues, I want to talk about the structure, the book and Eric come on in on this one.
Why did you decide that the conversation was the way to go? So what happened was Eric and I met finance conferences, and this is when I was in research for my last book, Austerity, that you mentioned, and I needed to meet bond market vigilantes. So I started going to these conferences and I met them and I kind of thought, well, he's not much of a vigilante. He seems quite sensible. And after a while, we struck up a friendship and we would be on panels together talking about stuff.
And people would say things like, hey, you guys are really good at communicating and very straightforward terms how the shit works. So, you know, you should write a book. And we thought it's a great idea, but we could never find the time. So I hatched a plan and the plan was I was going to come to London for a week. We were going to do a whole pile of reading on different things. We wanted to talk about aging in the economy, technology, why people are all getting so pissed off all the time about the politics.
And he sent me stuff. I sent him stuff. And then we got together and we recorded the chapters as a conversation. We just kind of talked the book out and recorded them on a couple of iPhones. Now we got Siri to transcribe the conversations and God lover put up with an Irishman and a Scotsman's accent. And we got into the normal text and I got a student to help me clean up. And I read a book and it was horrible.
It was exactly what you'd expect it sounded like to rich white guys set in the world to rights. And it was flat and it was boring. So we put it back into the conversation and actually structured that properly as a dialogue. And it just came to life. It was much, much better know that led down the line. And it can talk about this to issues with publishers because they didn't know how to sell a dialogue. But that's basically how it came about in that form.
And we were at the site once we did it, we decided this is the way we want to go. We don't want to change this.
Yeah, I mean, the thing I'm pleased about is the feedback that people like the dialogue, because, as Mark said, we had a lot of resistance from publishers. One publisher in particular said it reads like a magazine. And I thought, that's fantastic. You know, people read magazines. Exactly. It's exactly it's really hard to read a book on political economy. And so we just stuck to our guns. We had a lot of resistance from publishers.
And it also allows us to disagree. And I think, I mean, you know, with these kind of issues to try and make issues of politics, economics, and they're important. But to bring them alive, having an argument, having a disagreement, I hope it's a book you can pretty much open up at any point and you can just join in the conversation that that's really the aim.
Well, it's interesting you say that, Eric, because that's exactly how I read it, which was flicking between ideas and going forward going back. And you're absolutely right. You know, you'd really think, OK, I'm interested in this. Take it. And then the idea of a conversation, the idea that there was disagreement actually is incredibly attractive because it feels like a conversation and it feels like the sort of conversation you'd have as you tried to sort of grope your way to an answer.
It's like, what do you think of that? What do you think of that? No, I think there's so guys. Anyway, well done. The book is an amazing read. I think it's a it's a great summer read, and I'm glad to see that. I've seen it on the 40s summer reads of economics books, and it's it's really making making progress. I know how hard it is to get a book out there, number one, and then get listened to.
But let's focus, Mark, on the issues. Right. Angry where let's talk about the issue of anger. Why do you think there's so much anger out there? What's it related to and how does it feed back into economics?
So the middle of the book deals with this. What is the first part of the book frames it so radical talk about how we think about anger. I want to talk about how we think it's generated. So there's an analogy that we use in the book. What a metaphor of you will, which is capitalism is a bit like a computer. There's different national versions. And just as you've got different versions of laptops, they all have the same components.
And we say in the book, if you drop your laptop on the floor, you'll find it's got a motherboard, it's got a video chip. It's got this thought in. The next thing, I'm just like national economies. Everybody has a labor market. Everybody is a capital market, but they massively differ when you compare them across countries. Now, at any given point in time, just like a computer, there's got to be some software that gives instructions on that hardware, how to run.
And that's the economic ideas that we have in a given moment. And what happens just like computers, is over time incompatibilities between the hardware and software, how the economy actually works, and our ideas about to begin to cause problems. And every now and again, you get these whopping systems crashes. So you can think about the Great Depression and the chaos after World War One and a complete collapse of the entire world economy. That was like a big systems failure.
After that, there was an attempt to rebuild the hardware and the software that would be kind of the national economies that we got after the 1940s and 50s and Keynesian macro economics and demand driving the whole system full employment as the policy target. That was the sort of the way that we were running the world. The next big system crash comes along in the 1970s. That's when you get the big inflationary problems in the seventies. And then at that point, there's a whole kind of hardware modification.
This is when. The central bank suddenly come to prominence and then there's a whole rewriting of the software, which is variously what we call neoliberalism or privatize, integrates globalization, et cetera, et cetera. That system itself seems to work for a while. And then in 2008, that one blows up. Why is this? Because there's bugs in the software all along. And a bug in the software, which we focus upon in the book is the various guises in which inequality, inequality and the way that profits are dispersed amongst firms, inequality and wages inequality and wealth inequality in life chances.
All of that was Feldon by credit, and we had a huge credit crisis. Now, our basic argument on the macro level, on this level, is that what should have happened in 2008 was another fundamental reset. The system, instead of which the central banks came to the rescue, just pumped trillions and trillions of dollars, euros and yen into the system. And it came back as it was before. But all of those things that were generating all of those inequalities are still there.
So what begins to happen is that people begin to get very angry about the fact that they're living in a world in which is very much socialism for the rich and capitalism for the poor, austerity for auto bailouts for them. And although you're not reducing it to the financial crisis and this was that was the accelerant on something that had been building for a very long time across multiple societies. And the breakdown in politics is essentially people said we don't believe the chancellors who are running this anymore.
They told us they were experts. They told us they were in charge. They don't know what they're doing, etc. And that's where the anger begins to build.
Eric, let's talk about the anger itself. I mean, talk me through that phase, because obviously that's that's the catalyst for the analysis. Yeah, talk me through. Well, there was a certain point in time.
So Mark and I had a kind of view of the world and has some ideas about how we thought we could tackle some of the problems.
And at one point, Moxham said, why are people getting angry? And we just start we thought, can we integrate anger? And we went off and we decided to to have a look at the subject. And anger is fascinating. I mean, first of all, every human being knows what anger is. You know, children experience anger, children experience rage. And yet if you ask most people talk to me about anger, is anger a good thing?
Is anger a bad thing? Why do people get angry? I mean, I even think to myself, I'm not sure I ever asked myself that question and reflected upon it. It's a very odd thing that human beings do, getting angry, loss of temper. So that was kind of that really got us thinking and got the kind of intellectual juices flowing because it's something that's so prevalent people refer to repeatedly. And yet we're actually very inarticulate when it comes to discussing it.
And then we started reading and we discovered this is a subject that is thrown across all disciplines. There's neuroscience, moral philosophy, social psychology, self-help books. And what was lacking, though, was some kind of a synthesis. And there were two dimensions that really interested us about this is we came upon the idea that there was both a public anger and a private anger. And these are very, very different. And we'd get on to talk about this, but they're almost like opposites.
And then within public anger, it also has a sort of anger of angels on an anger of devils. And the anger of angels is the well known.
If you read the philosophy of on anger dating all the way back to Aristotle, Aristotle viewed anger as a response to injustice. And you see this even today. I was fascinated that there's a great YouTube, if you haven't seen it, with Cornel West, who's the sort of intellectual forefather of a lot of the civil rights movement in America.
An amazing talker as well, an amazing and I actually was lucky enough to be at a Bernie Sanders think in in Vermont. And Cornell was the speaker and I just was blown away by the charisma.
And so he uses the anger of angels is how I describe it. And he actually says and this is an Aristotelian idea, dates back to Aristotle is he was saying, what would it say about our society if people weren't on the streets protesting? Yes. If you witnessed witness police brutality like that, can you imagine our society was so apathetic and amoral that we wouldn't respond to it and that so that's one type of anger, which is the righteous indignation.
Now, then the next key point on our kind of intellectual journey was to go to the other extreme. And funnily enough, this started by using big data. We did a big search of news stories and we got it to categorize the news stories based on the theme of anger and the second most frequently the story concerned angry sports fans. Now, I'm sure you can relate to this time as soon as you say that. Absolutely. I know exactly how much I love being in that group.
Many times, watching the fantastically deflationary experience of the Republic of Ireland around the world, I've described him as the least talented but most loved football team in the world. And they make you angry.
They make you angry. And this was so intriguing. And we suddenly started to go, Why? And I started going to football matches. And I was obsessed by watching the fans. I'm only interested in football matches with a passionate, crazy fan base. You know, forget about the football. Go to where the real nutters lunatic fringe are.
And as Leeds United fan, I have been at that fringe. I have been in the lunatic fringe. And that is a particularly lunatic bunch. But go on. This is fascinating. So you go when you watch the final, you go and you watch a football match.
And the interesting thing is it doesn't surprise anybody that the angry fan hates the opposition. But what's what's striking is they regulate their own right. So so they attack their own players for not being passionate enough. They leave and attack their own fans. So I've seen great fans violence breaking out on a Wolfert football match where I take a mark between fans because one guy is singing, isn't singing enough, and he's been a season ticket holder for longer.
And so the idea came to us that these guys regulate tribal identity. And we started to look into the social psychology and the literature on this is this. This is a phenomena and it is a precursor to violence. So you end up realizing that anger has these two completely different faces. It is a recognition, it's a requirement to enforce on moral values that the Cornel West indignation, but it's also triggered to effectively trigger, you know, amoral violence and tribal rage.
Now, let's look at the second one, because the first one, by the way, if either of you read his book, Ellies Connect his book and crowds won the Nobel Prize in the early 80s. Elias Canetti extraordinary book. It's an amazing study. A little bit like yourself, Eric, going and observing what people do in crowds and what is what permission is given by the crowd, et cetera, et cetera. But let's come back. So there's two types of anger.
One is righteous indignation, which is a sort of a positive force. And the one we're seeing now in Black Lives Matter, for example, in the states. And then the other is this this kind of rage and impotence leading to violence. Where do you see Western democracies in this sort of analysis right now, this type of anger? Before we come back to the solutions, but give me examples of the types of anger we're seeing. You see it everywhere and you see the two of them mixed together, so I'll give you one of the examples we use in the book, which I think you still see everyday here, or at least you're getting diminishing returns to it.
But it's Trump. So what does Trump do? Trump basically goes to Wisconsin. Wisconsin's lost a third of its industry to not to Mexico, but to the south, to non-union states. Then it loses the rest to Mexico and China. You're talking a once very rich part of the country that has basically been on the down for 20 years. The Democrats are celebrating Obama's legacy and how wonderful everything is. And people, of course, are like, are you kidding me?
How wonderful things are? Things are crop here. And you guys come in every four years and just expect us to vote for you. Trump walks in and senses this and takes the language of righteous indignation, takes this language off. You have been ignored. He literally says, I am your voice. He does not recognition and not addressing the issue of No one's listening to you. I hear you. He then pivots and he turns around and he goes straight to the southern border, down to Arizona, to the border states, and starts talking about Mexicans as rapists and how they are like this and we are like this.
So on the one hand, he's using the anger of angels and recognition. On the other hand, these weapons are easing the energy of what we call the energy of tribes to build a coalition which encourages both sides, which is very typical of right wing populism. Other places that you see this thinking about the fact you have a disconnected Parisian elite, nobody who's normal can afford to live in Paris anymore. They all live in the burbs and commute and everybody in Europe drives diesel.
Along comes micro and macro says, well, we need to care about the environment. So what we'll do is we'll put a tax on diesel. And everybody who's now commuting into France on stagnant wages, no house to Forker, another fifteen euros a month for this tax. And this creates the green movement, which is rock French politics for the past two years. You can go to Chile, where simply put, in another 20 years, it was twenty five cents on the subway in Santiago caused the series of riots to cost around 40 people their lives over a three month period.
So we see this anger coming out of basically a politics of recognition and demand for recognition based upon systematic inequalities in these economies that are either weaponize this tribalism or address. There's moral outrage and you see the two of them in combination all over the place.
And because let's look at, for example, closer to home, let's look at Brexit. Can you frame Brexit and this this this sort of framework? Can you frame the rise of Sinn Fein, Eric, here in this sort of framework? Is that what you think?
Definitely. I think Brexit you see both of these these these types, you see both the moral outrage, I think, to some extent on both sides or an ethical kind of argument. And you for sure see the tribal energy. I mean, and in fact, you know, Farage very clearly, I think represents the tribal rage. And he refers to this kind of anger and he's always got a nod and a wink to nationalism. Very clearly. I think the kind of the moral dimension is less clear.
I mean, you know, Marine can, you know, I think is the most articulate one of the most articulate sort of pro Brexit tears. And I think you've had to kill economics.
Yeah, no, she's she's she's a wonderfully articulate, brilliant journalist. Great fun. Just for those of you listening who don't know Marine, she is the FTSE Brussels correspondent. Observant Muslim takes a religion and ethics very, very seriously and has a very interesting take on why she's a Brexiteer. Very, quite unusual, quite unusual and very articulate. Look, go on. I know.
Right. And I know that a lot of sympathy and I'm sure the three of us do. You know, and this is the dimension of Europe that left us all, I think, with with a sense of anger and an ethical objection was the euro crisis. And I think, you know, the appalling treatment of nations, the overriding of any sense of sovereignty, appalling overreach, reach by by bureaucrats in many cases, you know, in the case of the ECB, hugely overstepping their legal mandate and literally determining the fate of nations without even a nod towards democratic legitimacy.
God, I sound like a you're an anti European.
I was about to say, when did you join the Brexit party? I I'm Irish, Italian, and I know you're the only Irish on it. Doesn't make chips. You like swanky Irish. Italian. I'm thinking, you know, I was, you know, the Irish, Italians, a long and illustrious history. And I was always very intrigued at Italians. There's an Irish, Italian, chipper association, Irish. Do you know that? I don't want to tell you what they made the best chips, they definitely make the best chips.
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Doesn't John have another curious fact for you? I was just rummaging around there on these data, some data, that's my thing, but it's about foreign direct investment in Ireland, right? Just how much foreign direct investment Ireland gets, particularly for American corporations. I come back to at the end and I'll give you that review. And you know why we're doing this? We're doing this because we want to thank Vodafone for sponsoring this episode with Vodafone. You can follow your curiosity.
And this is all about curious facts. Let your whole family follow their curiosity when you bring everyone's plans together on Vodafone's multi mobile, a red family plan, such Vodafone red family for more. OK, so let's let's talk about we have the anger, we know what's going on, how does democracy and economics solve the problem of making people feel less angry?
Because at its core, sometimes rage and anger is the is the counterpoint to impotence. When you don't have power, you get angry. I think that's why children get angry, because they don't have any power over what's going on. How do we change economics now to subdue the anger, to make people feel they have a stake and therefore to prevent people moving in the tribal way, Volson them and foreigners and locals and domestics and cosmopolitans. How do you change this?
So I'm going to jump in first on this one, because I've got an I live and die by metaphore and I've discovered a new one for talking about this. So here's what I hate. I can't believe you had anybody Occoquan on it to all the nudge stuff. You know, the whole thing about nudging people into better behaviors. Yeah. So sordid. All right. So basically, that stuff drives me completely mental because essentially what it says is you're not a fellow citizen with whom I have to reason.
You're actually just a social problem. I need to manage. And so much of our politics, particularly the kind of centered or reformist left, has become technocratic, one career nudging, and they think that politics is reducible to a long list of policies. So Elizabeth Warren, although I very much like what she does, I hate the way she does it because I've got a policy for that. Nobody dies on the barricades for a policy. Right. So how should you think about that?
Well, I've started to think about what we propose an attack. We'll talk in detail about them as the furniture. And here's what I mean by this. If you take a whole bunch of people and put them in a room, the way that they interact with each other is very much contingent upon the furniture that's in the room. And they've got couches. They might relax. They've got hard she facing away from each other. They're not going to have a swinging time.
So the way that we think about these proposals are citizens well, fund a digital tax which basically grants property rights to people whose data is used by the big data companies, something very technical, dual interest rates, helicopter money. If we list all these as kind of policies below, what the hell is that? But what we want to suggest is if you put this in your economy, if you build these institutions, if you do this stuff, it changes the furniture in the room.
It changes the possibility of what you can do in your politics. And that's why we focused on these ones, because they hung together. And if you were to do these four things, it would make a huge difference to the life chances, I would think, of 80 percent of the people in your country. Now, having said all, but we take away our erichson.
Give me the four big solution, the big four to four big ideas.
Well, first of all, I just would like to repeat the fact that we're furniture makers because I've always wanted to be a furniture maker rather than an economist.
Well, you know, it's interesting. When I heard the expression cabinet makers, I thought they actually made cabinets, just the cabinets out there go for it.
I say, well, maybe if I could before we get into into the policies, if you could laminate, I think there's one other really important thing, because I think this particularly will resonate for me.
And I think also from Mark coming and certainly having grown up in Ireland in the 70s and 80s, is the power of nationalism as a political motivator is blindingly obvious if you've experienced it firsthand. And I think one of the big challenges, first of all, is to increase awareness of the extent to which the political class are incentivized to motivate and motivate and manipulate us by making problems into the other so that somebody else is the cause of the problem, whether it's the Europeans, whether it's immigrants, whether it's Mexicans, whether it's division within our own societies.
And and I think one of the big arguments we make in the book, which I think is important, is that this arose or accelerated this trend towards nationalism globally during the neoliberal era, because actually we lost alternative motivating political ideologies. And, you know, what does that mean in English is we stopped giving a shit about anything in politics because it was all kind of boring centrism and nothing really seemed to matter or motivate people. But politicians still need to get elected and the press needs to get eyeballs, particularly in a competitive digital age.
And this coalescence of incentives between the political class and the media, I think, is what has kind of hyper fuelled tribalism. So the real challenge for all of us who care about this stuff is how do we create a politics that isn't about tribalism, but people care enough about to, you know, go out and fight and motivate and get angry about in a positive way. That was the challenge we set ourselves.
No, I mean, I think that's incredibly well put, because I think you are right. I mean, people it is this disconnect between ourselves. And you're right about the media needing a story, needing to whip something up, needing to sell newspapers and get ad revenues or whatever. And the other side is the sort of technocratic takeover of politics where there's no big idea that you get emotional about, you know, there's no big justice and equality and civil rights and all these big ideas that you got out of bed for have kind of disappeared from the landscape in terms of politics.
So let's look now at the solutions that you said. There's sort of the furniture twisting and turning, the change in the dynamic to change politics in order, the objective that more and more people have a stake in society and do not get.
Attracted by, you know, the nastier end of politics, let's talk let's talk about for big ideas, Eric, maybe you take to market to show Anacostia dual interest rates, because I always get that one wrong ferret out of this car.
You got the wrong guy right out of the Citizen's Oil Fund, right. So here's what happens. Every time there's a financial crisis, which is basically every decade and they get bigger every time. Is there anyone with money gets bailed and anybody who lives on wages gets stuffed? What's remarkable about this crisis in Europe, at least, is how they've done the weeds for laws. Basically, they've done one of the things that we talk about helicopter money rather than making people unemployed and doing this weird thing to the central bank called quantitative easing, why not just people mail people checks to keep the economy whole so that when the crisis passes, then they're back to work.
And in fact, this will this has proven to be remarkably successful so that one of the things that we talk about, helicopter money is already being done because of the corporate crisis. But the big one that we've got is this. Every time the financial crisis, the investor classes, the top 20 percent who owned all the stocks and shares, dump them and what do they want and what are their institutions want? They want to buy government debt. Why?
Because that's a safe asset. The government's not going to go bankrupt, has got up if it's got a printing press or as reasonably well run like Ireland, where as a firm can go bankrupt and you want to be caught with worthless paper. So what happens every time this occurs is central banks. So there's a Bank of England or whether it's the ECB or particularly the Fed in America, they come along and they buy all those assets. They're basically putting a floor under how far those assets can go.
And that encourages investors to come back in is basically saying we've got capitalism, but nobody ever has to take a loss. Now, that's that's just ridiculous way of running the shop right on the other side. Meanwhile, if you're dependent on labor income, you've got nothing, particularly if you live in the US. So we say, why on earth are we doing this? Why don't we get the government in the form of the central bank to come in and actually buy those equities?
Don't just put a floor under prices through all this fancy monetary policy, just buy the bloody things, put them into a big passive fund. What that means is you buy them all, you put them in a box and you basically get an independent board that knows how to do investment, to basically run these things for the next 10 to 15 years. And then what happens is so-called equity stocks and shares basically give you a pay off after inflation of between four and six percent a year.
You compound it for 15 years. If you did that with 20 percent of GDP in a crisis, you would have little indication the United States, trillions of dollars you haven't talked to a single person to generate as well. You've done it simply because the government's cost of borrowing goes down in a crisis. The private sector goes up, you buy all this stuff, you let basically nature take its course over the next 15 to 20 years, you would have trillions of dollars to redistribute to the bottom 80 percent of the population, the ones who don't have assets.
And that gives them a claim on the national wealth. It makes them asset holders. It gives them a stake in the game rather than regarded them as a social problem to be managed. You're actually seeing your fellow citizens. This is your wealth, and we are collectively managing it. So we all have a stake in how the society grows and how it is right. How it's run. And we think that's incredibly important. And society such as like Ireland at exactly the right size to do this, they have enough trust and transparency that you can actually make this work on a basis and really change the lives of people, whether it's through finance and public housing.
Something is badly needed in Ireland, whether it's through bolstering the medical sector, whether it's through doing more for higher education and skills. You could do it and we could in a sense. And the money and a good capital this way that keeps the economy going, but then redistributes way more than you could ever do through taxes.
You know, it's really fascinating because this is an issue that we've been teasing about on the podcast in various different ways. This idea of wealth funds using the power of monetary policy, using the opportunity that the crisis affords or even the crisis affords. But the fact that interest rates are on a structural downward path and consequently the state is in the position to just think a little bit differently about the way in which it deals with, as you said, the bottom 80 percent, not the top 20 percent, who has certainly over the last 30 years have been bailed out, been.
Not just bailed out, but policy is always jaundiced towards their interests and they have become rich and this is obviously amplified inequality. Eric, give me the two other ideas, because, I mean, I find these ideas not only fascinating, but they're beautifully doable, which is actually the practically interesting side of this.
You can do all this. Eric, give me the two ideas you have. Right?
I mean, that is the Glorianna is this is solvable. If I just but just to put that the other ideas in context, there's three things that we all really, really care about. And I think the silent majority and more all agree on, which is we need to make our planet sustainable. Right. Nobody disagrees with that. Apart from the lunatic fringe, the level of inequality that you've been describing is totally unacceptable. It's not a high functioning society when 90 percent of the wealth is held in the hands of one percent.
Right. We surely we can do better than that. And the other thing is recessions are a disaster and we need to stop it. If we can't stop recessions, we need to minimize the consequences of recessions. And so that's what the three in a sense, the three kind of lines of attack is. We're saying we're going to do something about the planet, we're going to do something about inequality, and we're going to do something about recessions. And we're also saying the madness here.
And I think you, David, to your credit, are one of the few and I literally mean a handful of economists in the world who really realize how lucky we are. And the reason we're incredibly lucky is the state can borrow at negative real interest rates for up to 30 years across the developed world. And what does that mean in English? It means the private sector is paying the government to borrow, which which means and this is a law of arithmetic.
Anything that the government does with his budget, as long as it generates a positive return, which Mike was describing, it creates value. It is a stronger balance sheet as a result. So now what is the charge? The environment says we need to do investment spending. Well, that's fantastic, because we can finance something negative, real rates. We can do all the investment spending we want. So on the way we want to tackle that is Mark described the National Wealth Fund as a way to give assets to people who don't currently have assets and that we could do literally within six months.
You could have a dramatic impact on wealth inequality, but also within not much longer than that two to three years. You could transform, for example, the nature of the energy infrastructure in Europe. How do you do that? It's this idea of dual interest rates. Am I allowed? Am I allowed to go to buy an alfresco for June? Interest rates is a really simple idea, which is the problem at the moment in the world, or at least the perceived problem is central banks have kept on cutting interest rates.
People who have mortgages understand this. Every time the interest rate comes down, you should have a lower mortgage. You're a bit better off. What do you do when you get close to zero and everybody's already got a lot of debt and banks can't make any money is your mortgage rates don't come down, but also people who save money, whether you're a pensioner or whoever you are and you've got savings, you lose all your interest income. So you've got a problem.
When I cut interest rates, it doesn't seem to work anymore. Well, here's the idea. What happens if you reduce the interest rate on loans and you raise the interest rate on deposits so people who have savings get more income and people who are borrowing have lower interest payments, that is guaranteed to win. But it's absolutely a win win. And the point is we can do that. And thanks to probably one of the most unrecognized heroes of the current crisis, Philip Lane of the European Central Bank, the European Central Bank is already doing that.
Now, once you think that through the power is absolutely phenomenal, I'll give one simple example and then I'll shut up. Let's say the European Central Bank came out tomorrow and said we're going to do five year loans right at minus three percent. And these loans we're going to do 20 percent of Eurozone GDP. And these loans are only available to if you make green investments, they have to be in sustainable investments in the economy. And not only that, the banks have to pass on 200 basis points of more.
In other words, they have to cut the interest rates on those loans by 200 by two percent. Right. Instantaneously, you will get a boom in sustainable energy investment in the eurozone and that could be replicated across the developed world. So the environment, this is not a problem actually transforming our economies. It is a gift. We have an incredibly low cost of debt, which for 20 to 30 years, and we have a huge need to become more industrially oriented, have more capital goods investment, create much higher quality jobs, create a much cleaner and sustainable growth model.
That's just a failure of the mind. Eric, explain this to me.
If you have two different interest rates, right, so you have one positive for the saver so he or she gets stream of income for their savings and you have a negative rate of interest for the borrower. Who loses? Does the bank lose in the middle because obviously the bank needs to generate income from the spread between lending and borrowing are at the central bank finances? How is it actually done in practicality or you're spot on?
So the loser here, the loser in inverted commas, is the central bank. But the beauty of being a central bank is the central bank can create money. And this is where, you know, we were chatting before this about modern monetary theory and people like Stephanie Kalfin who have a huge amount of respect for and I think is is a phenomenally interesting and I'll give a plug to her book as well, the deficit with which I would highly recommend. And they write that the point that Stephanie makes is that the only constraint on creating money is inflation.
Right. The problem we have in the world at the moment is there's no inflation and the risk is outright deflation. So you are absolutely right. You can't the commercial banking system cannot run with dual interest rates in this sense, because if it was doing it off its own balance sheet, it would have a negative profitability. It would just be losing money. But the central bank can. And this is the brilliance of what Philip Lane has done at the European Central Bank and which should be replicated.
Economists need to get their heads around this. Right. There's a big problem with kind of moving policy economists to understand this, and we need to do it more aggressively. But you're absolutely right. We are financing this at the margin and utilizing the incentive structure and leverage, but we're financing it at the margin by creating money. But we're in a position to create money because the risk is deflation.
This would just let me just jump in for a second on this one. I said I wasn't going to talk about dual interest rates.
And no, I am a little bit, because if you are if you are worried about, you know, basically the balance sheet of the central bank. Right. Booking losses, there's a huge debate about whether it is actually possible, given the fact that they can always print money to cover the losses. But put that to one side. Imagine that you targeted the way that Eric said. So basically, you need to do a much stronger investment and let's say solar farms in southern Europe.
Right. That's what we're going to be spending on. Well, the central bank is a condition of its loan, could set up a private company. Right. And that private company could insist on having 10 percent of the equity in these new ventures. And then the equity, the value of that equity would be then registered on the central bank's balance sheet as a corresponding plus to the minus of the credit creation. So, again, as Alex says, this is a failure of the imagination.
There's no law of physics that says you can't do this stuff.
Now, the laws of arithmetic say it's a no brainer, right? If you give you know, we all know this. The simple example is a buy to let property. If you can imagine if you could get a mortgage on a negative interest rate, that means you're paid by the bank to take out the mortgage and then you get a positive rental income and that equity goes up every year.
Because just before we go, what sort of feedback are you getting? Because I find these ideas not only absolutely comprehensible, feasible, practical, doable. Are you getting pushback? Are you getting a sense that these ideas, although when we talk about them, are quite rational? There's a sense I've always had this there's this weird feeling that the more educated people are, the less they realize that sometimes simple solutions are in front of their eyes. Are you getting pushback, Marshall?
I just make some observations. I mean, I have a lot of contacts with policymakers. I mean, I think one of the other things we tried to do, and I think David will appeal to you as well, is to try and come up with ideas that don't obviously fit on the political spectrum. So where where where people's tribal instincts will go, that's left wing. I don't like it. That's right. We're not going to like it. And I think these ideas have appeal across the political spectrum, and that's where there is a great opportunity.
So I think there's an element where people slightly scratch their heads. People are very confused and nervous about leverage. People are very confused by what's happening with monetary policy and interest rates. And I fully understand that. But I actually think they are gathering an awful lot of momentum, momentum. And one of one of the points I'd like maybe to intro for Mark on this is the upside that can come from a return to the nation states is we have literally tens of countries with the same problem.
All it's going to take is one or two of them to break ranks and others will copy. That's what happens with politics, you know, and that's why I was really interested. David, I know you wrote about the National Wealth Fund and the whole idea that Ireland could have a really innovative new economic strategy. And the irony would be if Ireland does it and it's shown to work, people will copy it. That's very true.
Marc, last word on this, because it's a fascinating discussion, but we hopefully this will actually inform and encourage people to go out and get this book because it's full of amazingly brilliant ideas. And you're absolutely right. I mean, I have always felt that. Ireland has an insecurity when it comes to making this first move, but we did it many, many years ago on the multinationals, we took a bit of flak for it, transformed the economy, the whole society profoundly.
And Ireland could be a first mover. Mark, last word in this. I know you're over in the states and other states is a very strange place. How you would like to conclude, Mr. Blythe, before I see you again, hopefully economics, the pair of you.
So as soon as I'm being the metaphor generator for this conversation, I'm going to end with a metaphor drawn from the film. You remember The Lord of the Rings? I do. You remember the third film, The Strohmeyer at the end, there's a line where Oregon says war is upon you, whether you wish it or not. So my little metaphor here is these ideas are upon you, whether you wish it or not. And I'll give you an example.
In closing, last week, the Americans who basically own Amazon, Facebook, Google, 20 percent of the US stock market, the only bit that's growing the digital economy. As we know, these people pay no taxes. No without getting into Ireland's role. And put that to one side for the moment, right at the end of the day, it's an absolute disgrace. They have monopoly profits. They pay no taxes. And the Americans went to the OECD organisation in Paris and basically saying, yeah, let's talk about how we can have a tax on this.
And I think it's. Yeah, whatever. Right. And of course, they said, well, hang on a minute, all these companies are ours. The only equities anybody wants to hold stuff that you're not paying any taxes. And if anybody in Europe tries to put a tax on these guys, we're going to put tariffs on you. This is from your ally. Remember that, right? So you can't tax these guys anymore. Well, we've got we've got we've got a way of thinking about this that gets right around that problem.
And it's called the digital dividend. You see, what makes Google profitable is the fact that you give them your data. What makes Facebook profitable is you give them your data. So why are we giving it away for free rather than trying to tax them as end users? Why don't we license our data to them? And if they don't want to do that, then they don't have any data and then their business model collapses.
So there's a way that you get around the fairness and equity issue with these monopolies that don't pay any taxes on the profits. But you do it in such a way that you sell a property. Right. My information and the information of my fellow citizens you license thought to these companies and then basically there's a proper trade there that allows them to do what they do. But we also get the revenue back. So, you know, things happen in the world that suddenly make silly ideas and outlandish schemes seem perfectly reasonable and exactly what we're doing and what we should be doing.
And I think that's where we are.
Just not Mark Blythe and Eric Larkin, the authors of this really fascinating book and genomics. Thank you both for your time and we'll talk to you about soon.
Jesus loves those guys are great. Yes, guys are really good. And there's a lot of stuff that they were talking about that is similar to what you're talking about as well. But it's kind of like the just better as well, you might say that. But the ideas are simple, the simple. And that's that's what I find fascinating. It's always the way, John, that if you really understand your subject as those two guys do, you arrive at very simple conclusions and simple options.
Yeah. And you don't get bamboozled by what is not important in this idea.
We said, you know, what is important is very complicated and what is complicated is really important. Yeah. Yeah. It's very much the case for economic ideas. I mean, Mark Blyde start there was talking about the history of big ideas. He was talking about what happened. You know, we talk about systems failure of the Great Depression and then the post Second World War period and then the neoliberal period. So he's talking about these great Swades where ideas become.
Accepted. Yeah, and I think their ideas. Our. Soon to become accepted because but they have to gain the traction first. Yeah, but, you know, like, they do have to gain traction, but. It is a battle for ideas, economic policy and economics is a battle of ideas. I think they're talking about they're talking about a wealth fund, right. Something that we've talked about makes complete sense. Yeah. They're talking about a digital tax on your data, on your privacy makes complete and utter sense and seems to be coming in terms of technology.
They're talking about dual interest rates are talking about the fact the central bank can lose money for a long time because it prints the stuff you can actually kick start the economy with the central idea. These are these are big but simple ideas. And what. Is quite intriguing, is the way in which. So many very well-educated people refuse to accept simple solutions because I think their very commitment to education is a type of status that they have and they believe that if the local bus driver can figure it out, yeah, it can't be good because I'm the big 20 points in economics has spent 20 years in university.
You know what I mean? It's actually it's actually it's a status thing. And I think that's what Mark and Eric were saying. Like, these are doable things. These are simple ideas that can be executed. What is interesting actually is and we've spoken about this before, is how new ideas it's like the old phrase, you can teach an old dog new tricks and that a lot of the establishment who have been around for a long time and I kind of got stuck in the rot of of the norm.
But what I find encouraging is that there is a younger fraternity of politicians in Europe that might be more open to this.
Perhaps it could be. I mean, I've always found I mean, you've known me for all your life and I have I put great store in remaining childish. But really, I really like a child like like when I read stuff and when I see things, I'm like a kid. I still am like a child. And it's a really good way to be. Like I'm still every day amazed. I'm amazed by things, things that wow, I didn't expect that to happen is a good way to be.
It is a good way to be. It leaves you, you know, sometimes it leads you of blind alleys and you know, maybe if you're older and more cynical and less naive, I think naivete is a vastly underrated quality in humans, you know, to be open to new things. And that's definitely the case. When you get older, you get worried, particularly like economics, people confused about the status and their position. When I talk to academic economists, some of whom are really nice and very brilliant, you can see that they're very, very cagey about leaving their own comfort zone and entertaining big ideas are new things.
And I think that's just a human trait that you if you invest lots and lots of your time and your intellectual capital and your sense of yourself in being an expert in certain areas, then. You fear a new idea that can undermine you. Yeah, but that's only if you invest, that's only if you're worried about status, if you're not worried about status. I think you can you can roll with the punches all the time.
That's not just in economic terms. I mean, that's kind of human nature that you get more conservative as you get older and and you do become more liberal as I get older. You are you know, I mean, the communists, the communists out of control has lost control. But it is that kind of thing when you have even more responsibility when you're older. So you're trying to kind of keep a lid on everything. So it's kind of harder to be a little bit more Fula and loose.
Yeah, it's hard to be loose like. I just think as I get older, I, I think there's a massive, massive upside in remaining childish. Yeah. And I mean childish in the the way in which you can be surprised by things. I love that I did. I read things and I think, wow, I've never of that. Right. And so that idea of being childish, it means that you don't nothing is sacred. That's the one thing I love about, you know, when I, when I looked at my own kids, I remember when you and I were kids, you know, years and years ago getting off, exploring and going in and is such a big thing.
I mean, I remember this is very odd, but everyone knows, John. I've known for years we would spend days up a tree. This tree nails hammer nails into a tree making a tree house. And I know it sounds very much, you know, a different world, but you'd be up a tree and you would find it endlessly fascinating and leaves and branches and birds and animals and people coming around. And when we were kids, he didn't understand.
The people go off and snog in a field and you'd be up a tree watching the kids and teenagers drinking when we were about eight or nine and all that stuff. All what I loved about being a child is that you get up every day and the world amazed you. And everything was fascinating and everything was endlessly interesting. And I still think now I know it sounds weird, but I still live like that. I still think like that. I still think that would be brilliant.
I think it's really everything surprises you. And that, I think is a childish way. So I mean that I don't mean childish in that you're actually silly. Yeah. Although we kind of are. We are. You can enjoy the silliness, but it it's naivety. I think naivete is greatly underrated. We've got experience and he's not naive. Oh, get out of here. As you say as well that the you get the closer you get to when you pass fifty, you do have these notions of your mortality, but you certainly can sleep very well after you waking up in the middle of the night.
Yeah, well, I go to bed very late, so. Yes, that is true. You do. You do it. So I sleep. But, you know, you get a sense you're living like a teenager. You still like you go to bed about three or four a.m.. Yeah. You get up at midday known not Clayton Day in the bush, but notice it's the thing of as you get close to your mortality, there's also the flipside of it is you can go conservative or you can just go focus my quotes.
That foreign direct investment fact you were banging on about.
You've got to explain that the fact is of beauty. It is that over the last twenty years, Ireland has received in more American direct foreign investment. Right. Think about this. Right. Our tiny country than China, India, Russia and Brazil combined. Combined. That's an extraordinary fact. Wow, that's incredible. And again, we're bringing these facts to you via Vodafone, who are sponsoring this episode because with Vodafone, you can follow your own curiosity with unlimited data and Ireland's best performing mobile network.
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